Security & Fraud

SEC Charges Heartland Ex-CEO With Insider Trading

The U.S. Securities and Exchange Commission (SEC) announced on Tuesday (July 10) that it has charged the former chief executive of Heartland Payment Systems with insider trading.

According to the SEC, Robert O. Carr, the former CEO of the payment processing company, and his longtime girlfriend, Katherine M. Hanratty, engaged in insider trading. Specifically, Carr provided Hanratty with confidential information about a potential acquisition of Heartland Payment Systems by another payment processing company.

In the weeks leading up to the merger announcement, the SEC says that Carr gave Hanratty $1 million to open up a brokerage account and told her to use all of the money to purchase Heartland stock. The SEC contends that Hanratty followed those instructions by opening an account and purchasing more than 11,000 shares of Heartland stock. After the merger was announced, the stock price surged, and Hanratty sought Carr’s advice about selling the stock. She ultimately unloaded her position in a single day, earning a sizable profit on the stock sale. The SEC said the defendants made more than $250,000 of illicit profits.

The SEC’s complaint, filed in federal district court in Connecticut, charges Carr and Hanratty with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks disgorgement of ill-gotten gains plus prejudgment interest, penalties and injunctive relief. The complaint further seeks to bar Carr from serving as officer or director of any SEC-reporting company.

In June, The Wall Street Journal reported that federal investigators were looking into stock trades linked to the former Heartland CEO. The trades in question were revealed as part of a breach-of-contract lawsuit that Heartland, now part of Global Payments, filed against Carr in federal court in New Jersey. Global Payments acquired Heartland two years ago for $3.8 billion.

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